Prime Minister John Key says the Government is keen to look at how it can combat high KiwiSaver fees that eat up almost half of the earnings in the six default KiwiSaver providers.

His comments follow the Green Party proposal at the weekend for a seventh default provider managed by the Guardians of the New Zealand Superannuation (Cullen) Fund to slash fees and costs.

Last month the Financial Markets Authority's annual report showed 42 per cent, or $43 million, was charged in fees on fund earnings of $104 million for the six default providers.

The ratio was 28 per cent for non-default providers, which charged $121 million in fees on fund earnings of $432 million.

Mr Key said KiwiSaver fees had been high at default providers, given the level of management required, but the managers effectively managed the money on the savers' behalf.

"If you outsource that to the Government, it might lead to an implied Government guarantee that we are actually guaranteeing your funds and in KiwiSaver there is no guarantee that your funds are safe," he said.

"But looking generally about how we can reduce the fees is important - Australia went through that debate as it went more and more to compulsory provisions so it's definitely an issue to look at."

From 2013 Australia is implementing MySuper, with a single diversified strategy and a standard set of fees, aimed at reducing fees by up to 40 per cent.

Green Party co-leader Russel Norman said his party's proposal did not amount to a Government guarantee, but it could cut fees in line with the recommendations of the Savings Working Group, which said a larger scheme with a simple investment strategy would be cheaper to run.

The SWG report said having a single default provider could translate to as much as a 6 per cent increase in KiwiSaver funds over 20 years, or an increase in total KiwiSaver funds by $2.5 billion.

Dr Norman said a seventh default provider should be set up, and when the system is reviewed in 2014 it could look at having only one default provider.

"The logic is that it should be cheaper, add competition, and increase savings in the long term. The best thing is to set it up and see what we're dealing with when we review in 2014."

The Greens said their plan could see a 40 per cent cut in fees that could increase retirement nest eggs by between $23,000 and $140,000 over a lifetime, depending on contributions.

Investment, Savings and Insurance Association chief executive Peter Neilson questioned why the Cullen Fund should get the job when other overseas-based funds would likely have even lower fees and expenses.

Dr Norman said if that were the case, he would be open to looking at it.

"Our preference is a New Zealand-owned fund. The New Zealand Super Fund would be investing more in New Zealand than most global funds.

"There are certain advantages to having access to capital in New Zealand."

Big bites

Default providers* 42 per cent - $43 million of $104 million earnings lost in fees

Non-default providers* 28 per cent - $121 million fees on $432 million earnings lost in feesby Derek Cheng